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/ 07 May 2020

What is a Settlement Agreement?

Many employers are carrying out restructures of their teams and consulting with their employees and workers about terminating contracts of employment for reason of redundancy, due to the economic climate brought about by Covid 19. Often, such consultations lead to negotiations between employers and employees whereby a settlement agreement is proposed as a way of terminating the employee or workers contract. Under the terms of a valid settlement agreement, the employee can waive certain legal rights to bring claims against the employer in a Tribunal or Court, usually in consideration for payment by the employer to the employee of an agreed sum of money.

A settlement agreement is a legal contract that must contain certain specified requirements in order to validly achieve the objective: most often to enable the employee to terminate their employment and to compromise their abovementioned legal rights in return for an agreed financial consideration.

Statutory requirements for a settlement agreement

For a settlement agreement to be valid, certain conditions (which are set out in section 203(3) of Employment Rights Act 1996, with corresponding provisions in other statutes) must be met:

  • The agreement must be in writing.
  • The agreement must relate to a “particular complaint” or “particular proceedings”
  • The employee must have received legal advice from a relevant independent adviser on the terms and effect of the proposed agreement and its effect on the employee’s ability to pursue any rights before an employment tribunal.
  • The independent adviser must have a current contract of insurance, or professional indemnity insurance, covering the risk of a claim against them by the employee in respect of the advice.
  • The agreement must identify the adviser.
  • The agreement must state that the conditions regulating settlement agreements under the relevant statutory provisions have been satisfied.

Hanne & Co’s Settlement Agreement Service

James Collier, Hanne & Co Senior Associate in Employment Law can provide timely and effective legal advice to the employee that:

  • Ensures that the individual employee is properly advised on their legal position and potential Tribunal or Court claims.
  • Advise on the prospects of success, the potential value and timescales on matters identified as potential claims for the employee.
  • Consider the settlement agreement terms on offer in detail with the employee, negotiating on behalf of the employee to ensure the terms on offer are tailored as far as possible to meet their needs and be in their best interests.
  • We provide a written letter of advice that sets out the legal and other advice we have provided on the individual terms of settlement, before we ask for the employee’s approval of the final draft of the settlement agreement – we allow the employee time to consider the settlement agreement properly.
  • We provide email and telephone support and advice so that we can respond efficiently and effectively to support the employee at what is a stressful time.


Hanne & Co fees for settlement agreements are provided on a fixed fee basis.

Agreed settlement terms

If the terms of the settlement agreement are agreed between the employee and employer our fee for providing standard advice on the agreed terms of settlement is £500 + VAT. The standard £500 + VAT fee is often provided for within the settlement agreement to be paid by the employer on behalf of the employee, so there is often no cost to the employee for the standard service. Some negotiation of minor settlement terms within the agreement can be included within the standard fee.

Negotiating settlement agreement terms

If the terms of the settlement agreement are not agreed between the employer and employee, for example the amount to be paid as a settlement amount, or the terms on confidentiality or providing a reference, Hanne & Co can provide an enhanced settlement agreement legal advice and negotiation service for £800 + VAT.

Included in the enhanced fee of £800 + VAT is negotiation on behalf of the employee of enhanced terms of settlement, such as an increased compensation payment or increased redundancy payment, or a reference in an agreed form of words is often useful for an employee and may be negotiated by the employer for example. There may be other terms of settlement that are important, such as the removal of contractual restrictive covenants, which can be negotiated on the employee’s behalf.

If you are an employee and need advice on a settlement agreement, please contact us for our efficient settlement agreement legal advice service.

Get in touch
Call us on +44 20 7228 0017